Gangwal has sought markets watchdog Sebi's intervention to address the corporate governance issues at InterGlobe Aviation -- the parent of the country's largest carrier IndiGo -- where he holds around 37 per cent stake while Bhatia group has about 38 per cent shareholding.

In a reflection of the deep differences between the two promoter groups, InterGlobe Enterprises (IGE) Group has now issued three statements in less than a week seeking to clarify issues and reject the allegations by Gangwal.

Asserting that the arrangement between the promoter groups has been transparent from inception at IndiGo, Rahul Bhatia group Sunday claimed that Rakesh Gangwal always limited his financial risks and was making insidious efforts to create an unseemly controversy about corporate governance. In a reflection of the deep differences between the two promoter groups, InterGlobe Enterprises (IGE) Group has now issued three statements in less than a week seeking to clarify issues and reject the allegations by Gangwal.

Gangwal has sought markets watchdog Sebi’s intervention to address the corporate governance issues at InterGlobe Aviation — the parent of the country’s largest carrier IndiGo — where he holds around 37 per cent stake while Bhatia group has about 38 per cent shareholding.

“Even more significantly, during the turbulent period of a fledgling airline, it was left to the IGE Group, as a responsible founder, to fend for IndiGo. Gangwal was missing in action at that time and there were stages where he wanted to de-risk and pushed for the business to be sold,” the group said in a statement that also provided details about investments made by the two sides. Noting that Gangwal has much to answer, the group wondered whether there is sanctity in agreements entered into by business people – freely and at their own will.

“Do business ethics and morals permit a contracting party to walk away from its obligations at its convenience after it has enjoyed the benefits under an agreement and pretend to be a victim?,” it said. Referring to purchase of planes from Airbus, the statement said that the IGE Group and Gangwal gave a joint undertaking of support IndiGo in November 2005, wherein both sides undertook to invest in the airline at least USD 50 million (which then was about Rs 200 crore), and maintain that investment until the delivery of the last aircraft.

“As Gangwal was not going to take any further financial risk or obligation, IGE singly (though the undertaking to Airbus was a joint one ) took the obligation to further invest up to Rs 110 crore in IndiGo so that taken together with the then existing investment of Rs 99 crore, the conditions placed by Airbus could be met,” the group claimed. According to the statement, IGE Group continued to support the startup (IndiGo) without diluting Gangwal’s potential upside.

“Kapil Bhatia and Rahul Bhatia extended personal loans to IndiGo and personal guarantees to the banks for diverse financing needs of IndiGo such as pre-delivery payments, aircraft acquisition, and working capital requirements. “Starting from financial year 2005-06 at a level of Rs 143 crore of personal guarantees by financial year 2009-10, the aggregate financial exposure of IGE, Kapil Bhatia and Rahul Bhatia was well over Rs 1,100 crore… while Gangwal was in safe harbour with equity exposure of less than Rs 15 crore,” it noted. Further, the group said that there was a “risk ratio of almost 80:1 as between the IGE Group and Gangwal”.

Personal guarantees of Kapil Bhatia and Rahul Bhatia continued to be in force until end of financial year 2012 and by that time IndiGo — which Gangwal equates to a ‘paan ki dukaan’ (betel shop) — had an adequate balance sheet to support itself, the statement claimed.

Kapil Bhatia is the father of Rahul Bhatia. Gangwal has raised concerns about shareholders’ agreement that provides more powers to Bhatia group and about various related party transactions. “The rights and obligations as shareholders of IndiGo were enshrined in the shareholders agreement to reflect their agreement and understandings in relation to the governance, management and operation of IndiGo… the deal was struck between seasoned business people who made their own assessment of risks, their rights, and their obligations,” the statement said.